Joe Spak

Joe Spak questioned the OpEx and cost trends over the turnaround period, asking if marketing investments would need to significantly accelerate and where actual cost savings would be found. He also challenged the continued share buybacks, given past value destruction, and the rationale for continuing during a transition period.

Answer

CEO Toby Hartmann identified cost savings opportunities in streamlining duplicated functions, processes, personnel, and organizational structure due to current lack of integration. These savings will create capacity to reallocate towards technology, product, and marketing investments, rather than dialing them down. CFO Sonia Jain defended the share buyback plan, citing belief in the undervalued stock and the company's growth potential, targeting a quick turnaround within two years, making the $60 million floor for buybacks prudent.

Joe Spak questioned the OpEx and cost trends, specifically asking about the nature of marketing investments (reallocation versus acceleration) and where actual cost savings are being identified. He also challenged the continued share buyback plan, given past value destruction, and asked for the rationale behind maintaining this capital allocation strategy during a transition period.

Answer

CEO Toby Hartmann explained that cost savings would come from streamlining operations and organizational structure, addressing duplications arising from past asset non-integration. This efficiency would create capacity to reallocate funds towards technology, product investments, and marketing, rather than dialing down these areas. He highlighted high personal expenses as a focus for optimization. CFO Sonia Jain defended the capital allocation strategy, expressing confidence in reigniting the marketplace flywheel and unlocking growth potential within a two-year timeframe. She stated the belief that the stock is undervalued and that setting a $60 million floor for buybacks is prudent for long-term shareholder value.

Joe Spak with UBS sought a deeper understanding of Visteon's memory commentary, specifically regarding the 2% year-over-year headwind from recoveries, pricing, and FX, and whether it implies minimal actual recoveries on memory costs. He also questioned the responsibility for sourcing (OEMs vs. Visteon) and the potential margin impact. Additionally, he asked about the capital deployment plan, particularly if a high M&A outlay would leave little room for share buybacks.

Answer

Jerome Rouquet, SVP and CFO, Visteon, clarified that the 2% headwind includes annual pricing, reduced legacy semiconductor recoveries, and positive effects from new memory tensions and FX. He stated that Visteon intends to recover the majority of memory cost increases, with some timing mismatch accounted for, and expects legacy recoveries and annual pricing to be offset by business efficiencies. Sachin Lawande, President and CEO, Visteon, confirmed that Visteon directly sources virtually all memories, with OEMs primarily engaging to understand the situation. Jerome Rouquet reiterated that the capital allocation slide shows buybacks could be over $100 million, emphasizing opportunistic buybacks after prioritizing CapEx and M&A.

Joe Spak sought further clarity on the memory commentary, specifically how the 2% year-over-year headwind from recoveries, pricing, and FX aligns with the 2% increase in memory costs, implying limited recovery. He also asked about the responsibility for memory sourcing between OEMs and Visteon, the potential margin impact from memory timing mismatches, and how M&A spending up to $300 million might affect the capacity for share buybacks.

Answer

Senior Vice President and CFO Jerome Rouquet stated that Visteon intends to recover the majority of memory cost increases, with some timing mismatch expected, particularly in Q1. He clarified that annual pricing and legacy semiconductor recovery reductions are offset by efficiencies, and memory cost increases will be mostly offset. President and CEO Sachin Lawande confirmed Visteon handles virtually all memory sourcing directly. Jerome Rouquet indicated that while M&A is a priority, the capital allocation plan allows for over $100 million in share buybacks, with the company remaining opportunistic.

Joe Spak asked about customer feedback on affordability, the impact of Carvana's investment in lower interest rates, and the potential for EVs to address affordability gaps. He also asked for clarification on the Q4 tax benefit, deferred tax asset, and related tax receivable liability.

Answer

CEO Ernie Garcia highlighted Carvana's ability to lower interest rates by one point while maintaining flat GPU through better systems and lower cost of funds, emphasizing that fundamental gains allow sharing value with customers. CFO Mark Jenkins explained that the significant Q4 tax benefit resulted from releasing a full valuation allowance against deferred tax assets due to sustained profitability, with over $600 million flowing to common shareholders.

Joe Spak asked about the CapEx guidance for 2026, noting the increase from 2025, and inquired if 4% of sales is the new expected go-forward rate for CapEx to support growth and margin expansion. He also inquired about the profit and margin drivers by segment for 2026, specifically asking if Commercial Vehicle margins are expected to expand more than Light Vehicle margins to achieve the overall 250 basis points expansion.

Answer

Senior Vice President and CFO Timothy Kraus confirmed that 4% of sales is a good number for future CapEx, explaining that investments are needed for both growth and margin expansion, particularly for the next level of plant-level operational efficiency and automation, which are built into the 2026 and 2030 targets. Timothy Kraus agreed with the assessment, noting continued flow-through from cost savings and performance improvements, with slightly more opportunity in CV. He emphasized that margin expansion is driven by low-risk, high-return actions within the company's control, like automation and plant efficiencies, especially in ICE programs.

Joe Spak inquired about the increase in CapEx guidance for 2026 compared to 2025 and asked if a 4% CapEx to sales ratio should be considered the new go-forward rate to support the 2030 growth opportunities. He also asked for more color on the profit and margin drivers by segment for 2026, specifically how the 250 basis points margin expansion guidance would be distributed, assuming a greater contribution from Commercial Vehicle (CV) and slightly less from Light Vehicle.

Answer

Senior Vice President and CFO Timothy Kraus confirmed that 4% is a reasonable CapEx to sales ratio to project going forward, explaining that the increased capital expenditure is allocated to both growth initiatives and margin expansion efforts, particularly for plant-level operational efficiency. Timothy Kraus largely agreed with the assumption, noting continued flow-through of cost savings and performance improvements, with slightly more opportunity in the Commercial Vehicle segment but generally balanced across segments. He emphasized that these improvements are driven by controllable, low-risk, high-return actions like automation and plant efficiencies, primarily within ICE programs.

Joe Spak from UBS Group AG followed up on the discussion about investment in automation, asking when these investments are expected to start and how quickly the associated savings can be realized. He also sought clarification on the EV program cancellation charges mentioned for Q3, specifically if they were included in the results and if their recovery is factored into Q4 guidance.

Answer

Timothy Kraus (Senior Vice President and CFO, Dana Incorporated) explained that some EV investment dollars would be redeployed into automation, with a more deliberate and accelerated approach as cash flow improves post-transaction. Bruce McDonald (Chairman and CEO, Dana Incorporated) noted these are 'fairly short payback' investments. Regarding EV charges, Kraus confirmed that approximately $8-$10 million in costs related to canceled EV programs were booked in Q3 adjusted EBITDA, and Dana anticipates recovering these amounts in Q4, though they are non-contractual.

Joe Spak asked about the drivers of the strong implied Q4 free cash flow, key factors for 2025 free cash flow, and requested a refresher on the synergies between the Off-Highway division and the rest of Dana's business.

Answer

Timothy Kraus, SVP & CFO, explained that strong Q4 cash flow is typical due to business seasonality, driven by working capital and CapEx timing. He noted opportunities for further working capital improvements in 2025. James Kamsickas, Chairman & CEO, described the synergies as extensive, with the Power Technologies group supporting all three end markets (Light Vehicle, Commercial Vehicle, Off-Highway) with thermal, sealing, and electrification capabilities, making the businesses highly interconnected.

Joe Spak from UBS inquired about the high-level performance and outlook for Dauch Corporation's individual businesses, specifically the legacy American Axle and the newly acquired Dowlais, including sales assumptions, growth expectations, and Dowlais's performance in the latter half of 2025. He also sought clarification on the 2026 GM T1 production assumption and whether Dauch Corporation anticipates burning cash after accounting for restructuring and integration costs, and if these costs extend beyond 2026.

Answer

Chris May, EVP and CFO, stated that Dowlais's full-year 2025 results were not yet published, so he could not comment directly. He outlined core sales assumptions for 2026, including a slight decline in North American production, flat European markets, and a slight decrease in T1 Truck production. For GM T1, the assumption is 1.3-1.4 million units for 2026. May clarified that Dauch Corporation expects to generate positive cash flow from operations even after restructuring and synergy integration costs, citing an example of $50 million in cash flow at the high end of estimates. He confirmed that synergy integration costs would continue into 2027, with a total spend of $300 million front-weighted to the first two years, while core restructuring costs are expected to drop significantly after 2026.

Joe Spak asked for a high-level overview of the individual business performance for both the legacy American Axle and the newly acquired Dowlais, inquiring about sales assumptions, growth trends, and the financial performance of Dowlais in the second half of 2025. He also sought clarification on the 2026 GMT1 production assumption, the definition of free cash flow regarding restructuring and integration costs, and the expected duration of these costs beyond 2026.

Answer

Chris May, EVP and CFO, explained that Dowlais had not yet published its full-year 2025 results. He noted that both companies operate in similar markets with comparable demands, projecting North American production to be slightly down, Europe flat, and T1 Truck production slightly lower year-over-year. For free cash flow, Mr. May clarified that even after accounting for restructuring and synergy integration costs, the company anticipates generating positive cash flow, citing an example of $50 million at the high end of the guidance. He stated that synergy integration costs are expected to continue into 2027, with a total of $300 million planned over two years, while core restructuring costs are projected to decrease significantly after 2026. The 2026 GMT1 assumption was provided as 1.3-1.4 million units.

Joe Spak sought further clarification on the 2026 revenue guidance, specifically asking for a breakdown of contributions from tariffs, recoveries, or other pass-throughs beyond the 2 points from FX. He also inquired about the impact of metal and other input prices, such as copper, aluminum, and stainless steels, on PHINIA's financials and how these commodity price changes contractually flow through the business.

Answer

CFO Chris Gropp stated that tariffs were assumed to be breakeven for 2026, with additional tariff revenue in Q1 due to carry-forwards but offering no margin growth. CEO Brady Ericson added that FX, while contributing to revenue, does not have great conversion to margin. Regarding commodity prices, Ericson noted that copper, aluminum, and stainless steels are the main inputs, but their material content is not a significant percentage of overall revenue. Gropp added that where commodities are involved, there are pass-through mechanisms, though adjustments might occur at quarter-end. Both confirmed no meaningful commodity impacts were baked into the 2026 guide.

Joe Spak sought a detailed breakdown of PHINIA's 2026 revenue guidance, specifically the contributions from FX, tariffs, and other pass-throughs. He also inquired about the impact of rising metal and other input prices on financials and how these are contractually managed.

Answer

CFO Chris Gropp and CEO Brady Ericson explained that tariffs are assumed to be breakeven, offering no margin growth, with most of the impact coming from Q1 carryforwards. They noted that FX contributes to revenue but has a less favorable conversion to margin. Regarding commodity prices, Brady Ericson stated that material content is not a significant percentage of overall revenue, and Chris Gropp added that pass-through mechanisms are in place for commodities, confirming no meaningful commodity impacts are baked into the 2026 guidance.

Joe Spak from UBS asked for confirmation on the estimated annual revenue of $400 million-$500 million for the large conquest win, whether it's included in the 2027 backlog, and when capital spending for this win might begin.

Answer

Jason Cardew, Senior Vice President and CFO, confirmed that the large conquest win is outside the 2027 backlog, expected to launch in late 2028 and benefit 2029. He mentioned that Lear had approximately $800 million in conquest awards across Seating and E-Systems in 2025 and has a $1.5 billion pipeline for Seating conquest opportunities in 2026. Ray Scott, Lear President and CEO, emphasized Lear's strategic selection of programs with long history, strong brands, and good volume. Joe Spak then asked about OEM payments for canceled EV programs, inquiring if discussions were complete and if any payments were embedded in the 2026 outlook. Jason Cardew stated that major negotiations are largely complete, with some cash benefit embedded in 2026 guidance, and noted a positive surprise in Q4 net performance from these settlements. Joe Spak followed up, asking if these recoveries were included in the 'other $265 million' in the financial walk. Jason Cardew confirmed that some deferred revenue from these agreements appears in 'other' for Q4 and 2026.

Joe Spak from UBS inquired about the estimated annual revenue for Lear's large conquest win and its launch timeline relative to the 2027 backlog. He also asked about the status of negotiations and payments from OEMs for canceled EV programs, whether any are embedded in the 2026 outlook, and their placement in the financial walk.

Answer

Jason Cardew, Senior Vice President and CFO, clarified that the large conquest win launches in late 2028, benefiting 2029, and is not in the 2027 backlog. He mentioned $800 million in total conquest awards for 2025 across Seating and E-Systems. Regarding canceled EV programs, Jason Cardew stated that major negotiations are largely complete, with some cash benefit embedded in the 2026 guidance and some deferred revenue appearing in the 'other' category of the financial walk. Ray Scott, Lear President and CEO, reiterated a strategic focus on high-volume, long-history programs for future growth.

Joe Spak asked for clarification on the -$37 million outflow shown in cash from commercial negotiations, specifically regarding the timing of booking versus actual cash flow.

Answer

Mark Oswald, Executive Vice President and Chief Financial Officer, clarified that the -$37 million outflow represents a timing mismatch where commercial recoveries benefited Q1 earnings but the actual cash payment is expected to positively impact free cash flow in the back half of the year.

Joe Spak asked about the expanding pie of growth opportunities, particularly regarding reshoring decisions and whether customers are looking to move more production to North America beyond the current 2027 timeframe. He also questioned if Adient now has better line of sight for EMEA margin improvement to kick in by 2027, and sought clarification on the -$37 million cash outflow from commercial negotiations, specifically if it was a timing mismatch.

Answer

President and CEO Jerome Dorlack confirmed an acceleration in onshoring discussions, especially with Japanese OEMs, seeing potential tailwinds beyond current projections for 2028-2029, contingent on OEM capital allocation and USMCA developments. He stated that Adient is ideally suited to capitalize on this. For EMEA, he indicated better line of sight for recovery and margin accretion (25-50 basis points into 2027), driven by new business and customer program launches, despite delays due to legislative and competitive pressures. EVP and CFO Mark Oswald explained that the -$37 million cash outflow from commercial negotiations was indeed a timing mismatch, with benefits pulled ahead into Q1, and that this timing would help free cash flow in the back half of the year.

Joe Spak asked for more details on GM's evolving hybrid portfolio, its inclusion in the $10 billion-$12 billion CapEx guidance, and whether all vehicles will utilize the next-gen software-defined vehicle (SDV) architecture launching in 2028. He also sought clarification on the split and nature (temporary vs. ongoing) of the $1 billion-$1.5 billion onshoring and software expense.

Answer

Mary Barra, Chair and CEO, confirmed that all discussed products are comprehended in the CapEx guidance and that the next-gen SDV platform and Super Cruise will be available across both ICE and EV platforms. She noted GM is evaluating hybrid demand segment-by-segment. Paul Jacobson, EVP and CFO, estimated the onshoring and software expense split at about 50/50, with onshoring costs being temporary and software expenses ongoing investments in technologists and programmers.

Joe Spak asked for more details on General Motors' evolving hybrid portfolio, whether it's included in the $10B-$12B CapEx guidance, and if all vehicles will use the next-gen architecture launching in 2028. He also sought to unpack the $1B-$1.5B in onshoring and software expense, including its split and temporary vs. ongoing nature.

Answer

Mary Barra, Chair and CEO, confirmed that all discussed products are comprehended in the CapEx guidance and that the next-gen software-defined platform and Super Cruise will be available across both ICE and EV platforms. Paul Jacobson, EVP and CFO, estimated the onshoring and software expense split at roughly 50/50, noting onshoring costs are temporary while software investment is ongoing.

Joe Spak inquired about the Digital Data Networks (DDN) segment, specifically asking to understand why non-AI revenue might be slowing or declining quarter-over-quarter if AI growth continues, and whether the raised AI forecast is constrained by capacity or reflects conservatism given a potentially higher run rate.

Answer

CEO Terrence Curtin clarified that AI programs grew sequentially from Q4 to Q1, and the Industrial Solutions segment is expected to grow sequentially from Q1 to Q2. He stated that the bulk of the $200 million AI increase will materialize in Q3 and Q4 as programs ramp, extending into 2027, and affirmed that the forecast is not constrained by capacity, with DDN orders up 70% year-over-year.

Joe Spak asked about the Digital Data Networks (DDN) segment, specifically if the non-AI portion is slowing or declining sequentially given the overall flat revenue guidance, and whether the raised AI forecast is constrained by capacity or includes conservatism.

Answer

CEO Terrence Curtin clarified that AI programs grew sequentially from Q4 to Q1, and the Industrial Solutions segment is expected to grow sequentially from Q1 to Q2. He stated that the bulk of the $200 million AI increase will come in Q3 and Q4 as new programs ramp, extending into 2027. He emphasized strong momentum, reflected in 70% year-over-year DDN order growth, and denied any capacity constraints.

Joe Spak inquired about the factors contributing to the lower Q4 margin guidance of 11.8%, especially given Q3 performance and historical sequential improvements. He also asked for clarification on the copper price impact on margin versus dollar earnings and about the growth opportunity in non-automotive areas like energy storage for both EDS and ECG segments.

Answer

Varun Laroyia (EVP and CFO, Aptiv) attributed the Q4 margin outlook to weaker volumes, a $15 million customer recovery timing shift from Q4 to Q3, and elevated copper prices. Kevin Clark (Chair and CEO, Aptiv) added that FX (Mexican peso) and copper had a year-over-year impact north of 100 basis points. Mr. Clark highlighted significant non-automotive opportunities in energy storage, robotics, and drones, noting these revenues are approaching $3 billion and growing mid-teens, with the software portfolio (Wind River) over $600 million and growing over 20%.

Joe Spak from UBS inquired about the specific debt securities Sensata would prioritize in its tender offer, given the higher cost of the five and seven-year notes, and whether the lower interest expense was factored into Q4 EPS guidance.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, stated that due to the open tender, specific retirement preferences couldn't be disclosed. He noted that interest earned on cash roughly offsets interest on the 2029 notes, and no material impact on Q4 net interest was expected from the tender.

Joe Spak questioned the company's strategy for its debt tender offer, specifically which debt securities it would prioritize, and whether the anticipated lower interest expense was factored into the Q4 EPS guidance.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, stated that due to the ongoing tender offer, specific details on preferred notes could not be disclosed. He noted that interest earned on cash roughly offsets the interest expense on the 2029 notes, so no material impact on Q4 net interest or EPS guidance is expected.

Joe Spak from UBS followed up on the European market commentary, asking if there was decontenting on higher-end vehicles in addition to segment shifts. He also sought clarification on the implied Q4 gross margin step-down, inquiring about factors like VOXX contribution and potential semi-tariffs. Lastly, Mr. Spak requested an update on Full Display Mirror (FDM) sales, especially given potential lower EV demand, and the outlook for 2026.

Answer

President and CEO Steve Downing confirmed that both changing vehicle mix and decontenting on higher-end vehicles are occurring in Europe as OEMs seek to lower costs, partly due to tariffs. He clarified that the Q4 gross margin step-down is primarily due to VOXX representing a higher percentage of total revenue and seasonally lower sales levels around the holidays, not structural cost issues. COO and CTO Neil Boehm reported strong FDM growth in Q3 and Q4, projecting 200,000-300,000 more units sold in 2025 than in 2024, with continued growth expected into 2026.

Joe Spak asked for details on the recent surround ADAS nomination, including the factors that led the customer to choose Mobileye, the level of integration, DXP involvement, and whether the rollout would be on new models or refreshes. He also requested an update on other advanced surround engagements and if SuperVision engagements are shifting towards surround.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that the decision was driven by the OEM's need for system simplification, consolidating sensors to the powerful IQ6 High chip for richer sensing and advanced ADAS requirements, at a reasonable added cost. He noted that the IQ6 High can also consolidate parking and driver monitoring systems. The rollout will be a combination of new architectures and existing ones. He clarified that base ADAS engagements are expanding to surround, rather than SuperVision engagements shifting, and Mobileye has many ongoing engagements, preferring to disclose nominations when concrete.

Joe Spak asked for color on the second Surround ADAS nomination, specifically what factors secured the win, the level of integration, and whether rollout would be on new models or refreshes. He also requested an update on other advanced Surround engagements and if SuperVision engagements are shifting towards Surround.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that the decision to upgrade from EyeQ6 Lite to EyeQ6 High was driven by the OEM's desire for consolidated ECU architecture, routing multiple sensors (cameras, radars) to the EyeQ6 High for richer sensing and user offerings like hands-free driving and advanced NCAP compliance, at a reasonable added cost. He noted that rollout would be a combination of new architectures and existing ones. Nimrod Nehushtan clarified that the trend is more about Base ADAS engagements expanding to Surround, rather than SuperVision engagements shifting, and that Mobileye has many engagements, preferring to disclose nominations when concrete.

Joe Spak inquired about any structural differences impacting incremental margins between the Communication Solution, Harsh Environment Solution, and Interconnect & Sensor Systems segments, and the potential for AISS to achieve 30%+ incrementals.

Answer

CFO Craig Lampo stated there are no structural limitations preventing any segment from expanding margins. He noted that the Communication Solution segment's high organic growth (74%) required some cost additions. He expressed pride in AISS achieving 20% operating margins and a 30% sequential conversion margin, confirming its capability for future expansion.

Joe Spak from UBS inquired about the specific drivers for the Q4-weighted EBIT, asking if it was due to production schedules or recovery timing. He also sought clarification on the net tariff impact in H2 and asked about Magna's opportunity regarding GM's announced production shifts back to the U.S.

Answer

CFO Patrick McCann explained the Q4 weighting is a combination of typical Q3 production shutdowns and the back-ended timing of commercial and tariff recoveries. He clarified that tariffs, which were a headwind in H1, are expected to be a net positive to EBIT in H2 due to the timing of recoveries from signed agreements. CEO Seetarama Swamy Kotagiri added that Magna is well-positioned to support OEM production rebalancing but is focused on capital discipline before making new investment decisions.